Actuarial Report on the Government Annuities as at 31 March 2022

1 Executive Summary

1.1 Purpose of Report

In accordance with section 15 of the Government Annuities Improvement Act (“the Improvement Act”) an actuarial valuation was conducted as at 31 March 2022 for purposes of determining the actuarial liabilities and financial position of the Government Annuities Account (“the Account”). Section 15 of the Improvement Act also states that any surplus or deficit emerging as a result of the actuarial valuation shall be reported and, in the case of a surplus, credited to the Federal Government’s Consolidated Revenue Fund (CRF) and charged to the Account or, in the case of a deficit, charged to the Federal Government’s CRF and credited to the Account.

1.2 Data, Method and Assumptions

Data on current retirees, beneficiaries, deferred members, premiums and benefit payments were provided by Employment and Social Development Canada (ESDC) and Service Canada. The Government Annuities Branch located in Bathurst administers the annuities. The data are from a reliable source. We have performed summary tests on the data, and have found that they are accurate, reliable and sufficient for the purposes of the valuation. A description of contract types and a summary of the data are shown in Appendix A and Appendix B of this report. The actuarial liabilities are the present value of expected future benefits, determined in accordance with accepted actuarial practice and statutory valuation assumptions. Subsection 3(4) of the Government Annuities Regulations (“the Regulations”) states that the actuarial liability is to be determined using an interest rate of 7% per annum and the mortality rates of the Annuity Table for 1983, as modified by Projection Scale G.

1.3 Results

The following table summarizes the results of the actuarial valuation as at 31 March 2022.

Table 1 Results Overview
blankAs at 31 March 2022
($)
Assets67,976,070
Liabilities66,894,991
Surplus (Deficit)1,081,079
blankCountAverage Annual Pension
($)
Vested Members17,227 691
Deferred Members51 1,786
Total17,278 694

1.4 Conclusion

The surplus of $1,081,079 is credited to the Federal Government’s CRF and charged to the Account. The next valuation will be performed as at 31 March 2023.

2 Introduction

The Canadian Government Annuities Act of 1908 was one of the earliest significant pieces of social legislation in Canada. Its purpose was to encourage Canadians to prepare financially for their retirement. Government Annuities were purchased either by individuals or by employers as pension plans for their employees.

By the 1960's, other social benefit plans, such as Old Age Security (OAS) and the Canada Pension Plan were introduced and began gaining importance in providing Canadians with basic retirement income. The government's recognition that retired Canadians could now be served by other social security programs as well as the private sector brought about the decision to disband the Annuities sales force. In 1975, an Act of Parliament formally ended the sale of Government Annuities. Employers, however, could register new employees under group contracts until 1979. The Government Annuities are not sponsored by the Government - meaning the Government has no fiduciary liability. Its responsibilities are limited to provide and secure benefits in accordance with each contract's provisions.

The Annuities Branch continues to administer contracts under payment and those due to become payable, on behalf of clients from across Canada and around the world. The Account is not subject to any federal or provincial pension legislation; it is only subject to the Government Annuities Act, the Improvement Act and the Regulations. The assets and liabilities are shown in the Public Accounts of Canada. The assets are notional and are not subject to any investment policy or performance goals and objectives.

The Office of the Chief Actuary (OCA), Office of the Superintendent of Financial Institutions Canada (OSFI), has the mandate of performing the annual actuarial valuation of the Account as of 31 March 2022. The purpose of the valuation is to establish the Account’s liabilities, notional assets, and financial position, based on the statutory valuation assumptions.

3 Data

3.1 Data Required

Since the actuarial valuation determines both the assets and the liabilities, full details on the members as well as on the cash flows that occurred within the year are needed.

3.2 Member Data

Basic data on pensioners, beneficiaries and deferred members are provided by ESDC and Service Canada. The reports provided show the member data required to establish the liabilities: certificate number, maturity date, member, spouse and beneficiaries’ gender and dates of birth, annual pension amounts, and form of pension.

The required data reports are VY4741 for vested members (pensioners) and GY5642 for deferred members (members with deferred rights).

Notes on VY4741 Vested Data

Additional pension amounts data are required from Service Canada concerning the continuing pensions for joint and survivor contracts with percentages other than 50% or 100%, as well as for reducing annuities. VY4741 data does not show the accurate continuing pension amounts for annuities of type 29, 37, and 70-79.

Moreover, manual additions must be done, as the VY4741 report excludes certain members due to internal validation controls at Bathurst. The data related to this limited number of members were extracted from the VY5141 report. There were 29 such members as at 31 March 2022.

Notes on GY5642 Deferred Data

Pursuant to the Improvement Act which granted annual accrual of contributions accounts at 7% from 1 April 1975, the following table shows the multipliers that must be applied to the annual original pension amounts.

Table 2 Multipliers for Deferred Pension Amounts
Premium SeriesOriginal Interest RateMultiplier
44.0%1.22
53.0%1.32
63.5%1.29
74.0%1.22
85.0%1.14

These multipliers reflect the increase between the original interest rate applicable on the contracts and 7%. As the deferred members data only show the pension amounts prior to the enhancements, these multipliers are used to update the annual pensions.

It can be seen that the methodology used to derive these multipliers granted higher increases to contracts with lower interest rates, and vice-versa. The objective sought at the time was to distribute the increases as equitably as possible.

A reconciliation of pension amounts and membership status with last year’s membership has been performed. A detailed summary of membership data is shown in the Appendix B of this report.

3.3 Asset Data

Income consists of premiums received, funds reclaimed from the CRF for previously untraceable annuitants, notional earned interest and any transfer needed to cover the actuarial deficit. Payments and other charges represent matured annuities, commuted value of death benefits, premium refunds and withdrawals, and transfers to the CRF of actuarial surpluses and unclaimed annuities related to untraceable annuitants.

All reports used to determine the value of assets are provided by ESDC.

A list showing the names and short descriptions of the required reports is given in Appendix C of this report.

The data used are considered to be sufficient and reliable for the purposes of the actuarial valuation.

4 Methods and Assumptions

4.1 Liability Valuation Method

The actuarial liabilities are associated with two groups of members: vested and deferred. The vested group consists of the participants for whom the pensions are in payment as at 31 March 2022. The deferred group consists of members for whom payment of pensions will start in the future. The liabilities are the actuarial present value of future pension payments, the result of discounting the future expected benefits with interest and post-retirement mortality.

4.2 Assumptions

The interest and post-retirement mortality assumptions are statutory, as stated in section 15 of the Improvement Act and subsection 3(4) of the Regulations. Namely, the liabilities must be based on a rate of interest of 7% per annum and on the mortality rates of the Annuity Table for 1983, as modified by Projection Scale G, published in Transactions of the Society of Actuaries, Vol. XXXV (1983), at pages 882 and 883.

Accordingly, the 1983 individual annuity mortality table (IAM83) is used for individual contracts and the 1983 group annuity mortality table (GAM83) is used for group contracts. Both tables are sex-distinct, and are projected for 15 years with Projection Scale G. Furthermore, for consistency with the methodology used to develop these mortality tables, the liabilities were calculated based on the annuitants’ attained age (age last) at the valuation date.

Extracts from these mortality tables as well as associated life expectancies can be found in Appendix D of this report.

4.3 Asset Valuation Method

Since section 14 of the Government Annuities Act states that the monies received or paid under this act form part of the CRF, the assets are notional. Each year, any difference with the liabilities calculated is either credited (in the case of a surplus) or charged (in the case of a deficit) to the CRF, with a corresponding charge or credit to the Account. Following these adjustments, the assets value as at 1 April 2021 is equal to the 31 March 2021 liabilities. The assets value as at 31 March 2022 prior to any charge or credit to the CRF is obtained by adding interest at 7% on the 1 April 2021 value and adjusting for cash inflows and outflows also at 7% annual interest rate.

5 Results

5.1 Balance Sheet

The following table presents a summary of the balance sheet of the Account for the 2022 and 2021 fiscal years.

Table 3 Balance Sheet
($)
Fiscal Year 2021-2022 2020-2021
Assets as at 1 April 75,755,079 85,407,162
Income
Interest to 31 March
4,822,0985,438,538
Premiums for Deferred Annuities
3,35972
Unclaimed annuities recovered from CRF
2,9097,226
Total Income 4,828,366 5,445,836
Payments and Other Charges
Payments to Vested Members:
Vested Regular Annuity Payments
12,531,186Table 3 Footnote 114,057,002Table 3 Footnote 2
Vested Commuted Values
32,94080,058
Total Payments to Vested Members:
12,564,12614,137,060
Monies Refunded
3,1292,271
Values Transferred to CRF (Vested & Deferred)
40,12075,789
Total Payments and Other Charges 12,607,375 14,215,120
Income Less Payments and Other Charges (7,779,009) (8,769,284)
Assets as at 31 March 67,976,070 76,637,877
Surplus charged to the Account and credited to the CRF (1,081,079) (882,798)
Net Assets as at 31 March 66,894,991 75,755,079
Actuarial Liabilities as at 31 March 66,894,991 75,755,079

Table 3 Footnotes

Table 3 Footnote 1

Includes annuity and retroactive payments totalling $537 for members recovered from the CRF in 2021-2022.

Return to table 3 footnote 1

Table 3 Footnote 2

Includes annuity and retroactive payments totalling $10,619 for members recovered from the CRF in 2020-2021.

Return to table 3 footnote 2

5.2 Calculation of Interest

The following table outlines the calculation of the notional 7% annual interest credited to the Account for the 2022 and 2021 fiscal years.

Table 4 Calculation of Interest
($)
Fiscal Year 2021-2022 2020-2021
Vested Members
Interest on:
Prescribed Assets as at 1 April of prior year
5,221,9145,875,819
Maturities
23,42726,031
CRF Recoveries
168408
Less interest on:
Annuity Payments
(478,602)(537,225)
Commuted Values
(1,862)(2,938)
Transfers to CRF
00
Total Vested Members 4,765,045 5,362,095
Deferred Members
Interest on:
Prescribed Assets as at 1 April of prior year
80,942102,682
Premiums
2121
CRF Recoveries
04
Less interest on:
Maturities
(23,427)(26,031)
Refunds
(502)(201)
Transfers to CRF
(172)(12)
Total Deferred Members 57,053 76,443
Total Interest 4,822,098 5,438,538

5.3 Development of Actuarial Liabilities

The following table outlines the Account’s actuarial liabilities by members’ category as at 31 March of 2022 and 2021.

Table 5 Development of Actuarial Liabilities
Fiscal YearContract Type2021-2022
($)
2020-2021
($)
Vested Member
Males, Ordinary Life10 - 16 31,664,592 36,289,397
Females, Ordinary Life10 - 1618,434,224 20,173,534
Males, Guaranteed21 - 297,880,889 8,875,497
Females, Guaranteed21 - 294,198,250 4,662,576
Last Survivor30 - 373,118,023 3,789,856
Reducing at OAS70 - 79467,932 605,067
Annuities Certain50, 80198,945 177,639
Temporary Annuities607,025 4,889
Suspended Payments blank25,367 20,310
Vested Total blank 65,995,247 74,598,766
Deferred Members
Ordinary Life1047,950 44,514
Males, Guaranteed21 - 24479,534 642,737
Females, Guaranteed21 - 24313,535 412,659
Refunds in Process blank nil1,520
Suspense AccountsAccount 721 58,725 54,884
Deferred Total blank 899,744 1,156,313
Total Actuarial Liabilities blank 66,894,991 75,755,079

6 Experience

6.1 Analysis of Experience

As there are no new contracts purchased under the Government Annuities Act, the main source of experience gains or losses is the mortality. It includes changes in expected future payments due to the death or survival of annuitants and the difference between actual and expected benefit payments during the year.

The table below presents a reconciliation of the surplus between 31 March 2021 and 31 March 2022.

Table 6 Gains (Losses)
($)
Surplus as at 31 March 2021 nil
Premiums paid with interest3,570
Vested members mortality 1,068,696
Deferred members – retirements, mortality, refunds11,923
Transfers from CRF and other data changes(3,110)
Surplus as at 31 March 2022 1,081,079

6.2 Alternative Assumptions for Purposes of the Account’s Financial Statements, Prepared in Accordance with Section 4600 of Part IV of the CPA Canada Handbook – Accounting

6.2.1 Mortality

Following an external audit of the Account as at 31 March 2014, ESDC management asked the OCA to conduct a mortality experience study and to include the amount of the actuarial liabilities under experience-adjusted mortality rates in future Actuarial Reports on the Government Annuities.

6.2.2 Discount Rate

To promote greater comparability with other public service pension plans that are part of the Public Account of Canada, the liabilities shown in the Account’s financial statements is measured using a different discount rate than the prescribed interest rate of 7%. The alternative rate is established based on a yield curve approach. This yield curve is determined by reference to market yields at the end of the reporting period on Government of Canada Bonds and treasury bills.

The OCA has determined that the liabilities as at 31 March 2022 under experience-adjusted mortality rates and the alternative discount rate is $81.6 million, which is $14.7 million higher than under the prescribed assumptions. More details are presented in Appendix E.

7 Actuarial Opinion

In our opinion, considering that this report was prepared pursuant to the Government Annuities Act and the Government Annuities Improvement Act:

  • the data on which this report is based are sufficient and reliable for the purposes of this report;
  • the assumptions used comply with legislative requirements;
  • the methods employed are appropriate for the purposes of this report; and
  • as at 31 March 2022, there is a surplus of $1,081,079 which is credited to the Federal Government’s Consolidated Revenue Fund and charged to the Government Annuities Account.

This report has been prepared, and our opinion given, in accordance with accepted actuarial practice in Canada. As of the date of the signing of this report, we have not learned of any events that would have a material impact on the results presented in this report as at 31 March 2022.

Mathieu Désy
Fellow of the Canadian Institute of Actuaries
Office of the Chief Actuary, OSFI

Luc Léger
Associate of the Canadian Institute of Actuaries
Office of the Chief Actuary, OSFI

Alice Chiu
Associate of the Canadian Institute of Actuaries
Office of the Chief Actuary, OSFI

Ottawa, Canada
31 August 2022

Appendix A - Contract Types

The following describes the annuities provisions as specified by the contracts:

Ordinary Life: At maturity, this annuity is payable for as long as the annuitant lives, but at death the annuity ceases immediately and there are no death benefits.

Guaranteed: The annuity under this contract is payable for life but it is guaranteed for a minimum period of 5, 10, 15 or 20 years.

Contingent Survivor: This annuity is based on two lives. The annuity is payable to the principal annuitant for as long as he or she lives. At death, the annuity is payable to the survivor until his or her death.

Joint and Last Survivor: This contract differs from the Contingent Survivor contract in that the annuity instalments are payable to both parties. After the death of one partner, the annuity is made payable to the survivor as long as he or she lives.

Reducing Option: The Reducing Option is an arrangement whereby the level of the annuity purchased is paid at an increased amount from age 50 (or later) to age 65. At age 65, the annuity decreases by the amount of Old Age Security in effect at the date of maturity. The annuity is payable for life, with death benefits available for the duration of the guaranteed period, if there is one.

The following describes the contract types:

Single Life - No Guarantee (10 - 16)

  1. Ordinary
  2. Guarantee expired: on valuation change of 21 - 24
  3. From last or contingent survivor: 30, 35, 36, 37
  4. From last survivor guarantee expired: on first death of 31
  5. From reducing ordinary: on reduction of 70
  6. From reducing guaranteed: on reduction of 79, on valuation change of 29 or from 71-74 where reduction and end of guarantee coincide
  7. From reducing survivor: 36, 37

Single Life with Guarantee (21 - 29)

  1. Guaranteed 5 years
  2. Guaranteed 10 years
  3. Guaranteed 15 years
  4. Guaranteed 20 years
  5. From 71-74 after reduction still within guarantee

Joint Lives No Guarantee (30 - 37)

  1. Ordinary Last Survivor (100%)
  2. Last Survivor guarantee expired (100%)
  3. Contingent Survivor (100%)
  4. Contingent Survivor reducing by one half at death of Principal Annuitant (50%)
  5. Contingent Survivor reducing by any other amount at death of Principal Annuitant

Annuities Certain (50 & 80)

  1. Certain level amount (Includes from 80 after reduction)
  2. Certain, reducing

Temporary Annuities (60)

  1. Temporary

Reducing Annuities (70 - 79)

  1. Ordinary, reducing
  2. Guaranteed 5 years, reducing
  3. Guaranteed 10 years, reducing
  4. Guaranteed 15 years, reducing
  5. Guaranteed 20 years, reducing
  6. From 71-74, guarantee expired before reduction

Appendix B ― Membership Data

B.1 Vested members at 31 March 2022

Table 7 Contract Types 10-16: Vested Ordinary Life
Age blankMalesFemalesTotal
50-59Average Pension630959893
Number145
Average Age59.058.858.8
60-69Average Pension965918939
Number6278140
Average Age66.166.666.4
70-79Average Pension855746803
Number7857241,509
Average Age76.375.876.1
80-89Average Pension648551618
Number5,2022,3307,532
Average Age85.385.185.2
90-100Average Pension700557646
Number3,7602,2776,037
Average Age93.193.793.3
100 +Average Pension701491579
Number82114196
Average Age101.8102.3102.1
Total Average Pension686583649
Total Number9,8925,52715,419
Total Average Age87.687.587.5
Table 8 Contract Types 21-29: Vested Guaranteed
Age blankMalesFemalesTotal
50-69Average Pension2,0111,8891,959
Number141104245
Average Age66.566.466.4
Average guarantee9.18.58.8
70-79Average Pension1,4821,1861,390
Number376171547
Average Age74.674.474.5
Average guarantee5.04.64.9
80-89Average Pension1,2178171,096
Number301343
Average Age81.581.281.4
Average guarantee2.23.22.5
Total Average Pension1,6041,4231,542
Total Number547288835
Average Age72.971.872.5
Average guarantee5.96.05.9
Table 9 Contract Types 30-37: Vested Joint & Survivor
blank Males Females Total
Total Average Pension 537322531
Total Number 89122913
Average Age 86.785.286.6
Average Spouse Age83.484.383.4
Average Continuing Percentage73%70%73%
Table 10 Contract Types 50 & 80: Vested Certain
blankTotal
Average Pension 1,283
Number 41
Average Certain Period 4.7
Table 11 Contract Type 60: Vested Temporary
blankTotal
Average Pension 828
Number 3
Average Age 61.7
Average Period 3.3
Table 12 Contract Types 70 – 79: Vested Reducing
blank Males Females Total
Average Pension4,4234,5104,472
Number7916
Average Reduced Pension2,2682,0372,138
Average Age62.462.962.7

B.2 Deferred Members at 31 March 2022

Table 13 Contract Types 10: Deferred Ordinary Life
blankTotal
Average Pension3,224
Number2
Average Age67.0
Table 14 Contract Types 21-24: Deferred Guaranteed
blank Males Female Total
Average Pension1,9151,4531,727
Number292049
Average Age62.461.261.9
Average Guarantee15.715.515.6

B.3 Membership Reconciliation

Table 15 Membership Reconciliation
Vested
Contract Types 10-16 21-29 30-37 50&80 60 70-79 Total
Count as at 31 March 2021 17,4119681,0304322219,476
Maturities016001017
Transfers from/to Other Contract Types243(141)(108)120(6)0
Deaths or Expired AnnuitiesTable 15 Footnote 1(2,232)(9)(9)(14)00(2,264)
Net CRF TransfersTable 15 Footnote 2(3)10000(2)
Count as at 31 March 2022 15,419 835 913 41 3 16 17,227
Deferred
Count as at 31 March 2021 73
Maturities (17)
Deaths and Refunds(1)
Net CRF Transfers(4)
Count as at 31 March 2022 51

Table 15 Footnotes

Table 15 Footnote 1

The 2,264 Deaths or Expired Annuities are composed of 1,497 group certificates and 767 individual contracts.

Return to table 15 footnote 1

Table 15 Footnote 2

The 2 net CRF transfers are 3 group contracts transferred to the CRF and 1 individual contract transferred from the CRF.

Return to table 15 footnote 2

Appendix C ― Sources of Data

C.1 Reports Required

The following are the reports used in order to perform the Government Annuities Account valuation. The main reports are provided by ESDC and Service Canada.

C.2 Membership Data

  • VY4741P1: Basic Vested Data
  • VY5141: Vested Annuitants to be added manually (Records to be completed using report VY4742P1)
  • GY5642: Basic Deferred Data

Service Canada also provides accurate pension amounts for plans 16, 37, 70-79, and 29, and additional data for plans 50 and 80. This data consists of pension amounts, reduced pension amounts where applicable, date of reduction and date of final payment. Even though the total actuarial liability is taken directly from VY5141 for plans 50 and 80, it must be individually calculated for purposes of gains and losses analysis.

C.3 Asset Data

VM3942: Vested benefit payments and maturities by period

GY5646, GM4741, and GM4742: Data related to refunds

Premiums paid are provided by the Annuity Accounting Division of ESDC.

Benefit payments are provided by the Annuity Accounting Division of ESDC.

The monthly VM3942 reports are used to reconcile the Annuity Accounting Division’s benefit payments. Ultimately, the Annuity Accounting Division’s figures are used for balance sheet purposes. The monthly GM4741 and GM4742 reports are used for group and individual contracts.

C.4 Other Data

ESDC also provides balances for suspense accounts (GY5644 and GR3442), refunds in progress (GY5941) and suspended payments (VY5443).

Appendix D ― Mortality Tables

D.1 Projection of Mortality

The mortality assumption is statutory, as stated in section 15 of the Improvement Act and subsection 3(4) of the Regulations. Mortality rates are to follow the Annuity Table for 1983, as modified by Projection Scale G published in Transactions of the Society of Actuaries, Vol. XXXV (1983), at pages 882 and 883. SOR/97-495, s. 2.

Accordingly, the IAM83 table is used for individual contracts and the GAM83 table is used for group contracts. Both tables are used on sex-distinct basis and are projected for 15 years with Projection Scale G. Furthermore, for consistency with the methodology used to develop these mortality tables, the liabilities were calculated based on the annuitants’ attained age (age last) at the valuation date.

The following table shows the mortality rates as well as Projection scale G for selected attained ages.

Table 16 Mortality Rates
Age GAM83 Original IAM83 Original Projection Scale G GAM83 Projected IAM83 Projected
Males Females Males Females Males Females Males Females Males Females
100.0002930.0000960.0003820.0001410.0075000.0120000.0002620.0000800.0003410.000118
150.0003250.0001400.0004350.0001880.0022000.0070000.0003140.0001260.0004210.000169
200.0003770.0001890.0005050.0002600.0014000.0050000.0003690.0001750.0004940.000241
250.0004640.0002530.0006220.0003490.0010000.0065000.0004570.0002290.0006130.000316
300.0006070.0003420.0007590.0004410.0049000.0105000.0005640.0002920.0007050.000376
350.0008600.0004760.0009170.0005450.0150000.0185000.0006860.0003600.0007310.000412
400.0012380.0006650.0013410.0007420.0200000.0225000.0009140.0004730.0009900.000527
450.0021830.0010100.0023990.0011220.0185000.0210000.0016500.0007350.0018130.000816
500.0039090.0016470.0040570.0018300.0175000.0200000.0030000.0012160.0031130.001352
550.0061310.0025410.0059940.0028910.0160000.0185000.0048130.0019200.0047060.002185
600.0091580.0042410.0083380.0044670.0150000.0175000.0073000.0032540.0066470.003428
650.0155920.0070640.0128510.0073360.0150000.0175000.0124290.0054200.0102440.005629
700.0275300.0123850.0213710.0116970.0135000.0175000.0224520.0095040.0174290.008976
750.0445970.0239920.0350460.0201270.0125000.0160000.0369290.0188360.0290200.015802
800.0740700.0429450.0570260.0363950.0125000.0150000.0613340.0342340.0472200.029013
850.1148360.0699180.0909870.0655180.0125000.0150000.0950900.0557360.0753420.052228
900.1663070.1117500.1348870.1136050.0110000.0135000.1408820.0911390.1142650.092652
950.2340860.1824190.1912140.1742280.0100000.0125000.2013280.1510520.1644550.144269
1000.3191850.2951870.2709060.2392150.0040000.0050000.3005610.2738060.2550990.221888
1050.4695310.4878160.4052780.3534140.0000000.0000000.4695310.4878160.4052780.353414
1101.0000001.0000000.6348140.5844620.0000000.0000001.0000001.0000000.6348140.584462

D.2 Life Expectancies

The following table shows life expectancies under the above-stated mortality assumption for selected attained ages.

Table 17 Life Expectancies
Age Group Individual
Males Females Males Females
1565.471.867.172.2
2060.566.862.267.3
2555.661.957.462.4
3050.757.052.557.5
3545.952.147.752.6
4041.047.242.947.7
4536.242.338.142.8
5031.637.533.538.0
5527.132.729.133.3
6022.828.124.828.7
6518.723.620.724.3
7015.019.316.920.0
7511.815.313.516.0
809.111.910.512.4
857.09.18.19.3
905.36.66.26.9
954.04.64.65.1
1002.82.93.23.6
1051.91.92.22.5
1101.01.01.51.6

Appendix E ― Alternative Mortality and Discount Rate Assumptions

E.1 Mortality Rates

The experience-adjusted mortality rates are based on the Canada Pension Plan retirement beneficiaries’ mortality assumptions, as developed for the 30th Actuarial Report on the Canada Pension Plan as at 31 December 2018. These rates are further adjusted using a 3% load for males and a 4% load for females.

E.2 Discount Rates

The annual alternative discount rates used to calculate the liabilities are 2.38% as at 31 March 2022 and 1.49% as at 31 March 2021. They are determined using a yield curve approach. Under this approach, the discount rate corresponds to an equivalent flat discount rate based on a yield curve and the projected cash flows. The yield curve is based on market yields at the end of the reporting period on Government of Canada bonds and treasury bills. The Bank of Canada develops and publishes monthly a yield curve for Government of Canada zero-coupon bondsFootnote 1.

Table 18 shows the actuarial liabilities under the experience-adjusted mortality rates and the alternative discount rates while Table 19 provides sample experience‑adjusted mortality rates at different ages and for different years.

Table 18 Development of Actuarial Liabilities
(with Experience-Adjusted MortalityTable 18 Footnote 1 and Alternative Discount RateTable 18 Footnote 2)
Fiscal YearContract Type2021-2022
($)
2020-2021
($)
Vested Member
Males, Ordinary Life10 - 16 36,291,623 43,387,877
Females, Ordinary Life10 - 16 21,455,414 24,651,466
Males, Guaranteed21 - 29 11,311,551 13,793,404
Females, Guaranteed21 - 29 6,116,974 7,444,396
Last Survivor30 - 37 3,775,361 4,863,514
Reducing at OAS70 - 79 712,262 1,011,018
Annuities Certain50, 80 235,050 209,291
Temporary Annuities60 6,965 4,702
Suspended Payments blank25,367 20,310
Vested Total blank 79,930,567 95,385,979
Deferred Members
Ordinary Life10 82,481 90,010
Males, Guaranteed21 - 24 908,886 1,380,743
Females, Guaranteed21 - 24 576,500 885,488
Refunds in Process blank nil-1,520
Suspense AccountsAccount 721 58,725 54,884
Deferred Total blank 1,626,592 2,412,645
Total Actuarial Liabilities blank 81,557,159 97,798,624

Table 18 Footnotes

Table 18 Footnote 1

Using mortality assumptions used for the CPP beneficiaries (with appropriate loading) consistent with the 30th CPP Actuarial Report for both fiscal years 2020-2021 and 2021-2022.

Return to table 18 footnote 1

Table 18 Footnote 2

Using a yield curve approach determined by reference to market yields at the end of the reporting period on Government of Canada Bonds and Treasury Bills (the equivalent flat discount rate is 1.49% as at 31 March 2021 and 2.38% as at 31 March 2022).

Return to table 18 footnote 2

Table 19 Sample Mortality Rates
(Experience-Adjusted Mortality)
AgeMales Females
2022-23 2032-33 2042-43 2052-53 2022-23 2032-33 2042-43 2052-53
500.002733 0.002448 0.002259 0.002084 0.001903 0.001741 0.001606 0.001482
550.004120 0.003644 0.003362 0.003102 0.002805 0.002535 0.002339 0.002159
600.005239 0.004554 0.004202 0.003875 0.002771 0.002466 0.002275 0.002099
650.010523 0.009163 0.008453 0.007793 0.006492 0.005785 0.005336 0.004929
700.015808 0.013844 0.012768 0.011783 0.011247 0.010100 0.009326 0.008605
750.026062 0.022829 0.021065 0.019436 0.018340 0.016500 0.015233 0.014056
800.043787 0.038336 0.035371 0.032651 0.031705 0.028414 0.026221 0.024208
850.079261 0.069450 0.064058 0.059125 0.057429 0.051043 0.047087 0.043449
900.142415 0.127122 0.119383 0.112169 0.105702 0.094992 0.089176 0.083762
950.235769 0.219779 0.210756 0.202146 0.193727 0.180471 0.172958 0.165885
1000.353022 0.339968 0.330955 0.321465 0.303306 0.291067 0.282934 0.274821
1050.479426 0.471182 0.464777 0.458355 0.423505 0.415092 0.409191 0.403253
1100.601240 0.601695 0.602109 0.602213 0.546975 0.547391 0.548027 0.547901
1150.684758 0.684791 0.684870 0.684876 0.635913 0.636155 0.636308 0.636274
1201.000000 1.000000 1.000000 1.000000 1.000000 1.000000 1.000000 1.000000

The table below presents a reconciliation of the actuarial liability between 31 March 2021 and 31 March 2022.

Table 20 Reconciliation of Actuarial Liability
(with Experience‑Adjusted MortalityTable 20 Footnote 1 and Alternative Discount RatesTable 20 Footnote 2)
($)
Fiscal Year 2021 – 2022 2020 – 2021
Liability as at 1 April 97,798,624 114,761,241
  Accrued interest 1,354,070994,923
  Premiums 3,35972
  Reclaimed annuities 2,9097,226
  Annuity payments (12,564,126)Table 20 Footnote 3(14,137,060)Table 20 Footnote 4
  Premium refunds and other (3,129)(2,271)
  Unclaimed annuities (40,120)(75,789)
  Change in mortality assumption --
  Change in discount ratesTable 20 Footnote 5(4,733,007)(3,746,679)
  Experience(261,421)(3,039)
Liability as at 1 April 81,557,159 97,798,624

Table 20 Footnotes

Table 20 Footnote 1

Using mortality assumptions used for the CPP beneficiaries (with appropriate loading) consistent with the 30th CPP Actuarial Report for both fiscal years 2020-2021 and 2021-2022.

Return to table 20 footnote 1

Table 20 Footnote 2

Using a yield curve approach determined by reference to market yields at the end of the reporting period on Government of Canada Bonds and Treasury Bills (the equivalent flat discount rate is 1.49% as at 31 March 2021 and 2.38% as at 31 March 2022).

Return to table 20 footnote 2

Table 20 Footnote 3

Includes annuity and retroactive payments totalling $537 for members recovered from the CRF in 2021-2022, and vested commuted value payments of $32,940.

Return to table 20 footnote 3

Table 20 Footnote 4

Includes annuity and retroactive payments totalling $10,619 for members recovered from the CRF in 2020-2021, and vested commuted value payments of $80,058.

Return to table 20 footnote 4

Table 20 Footnote 5

The discount rate used to calculate liabilities changed from 0.93% in 2019-2020 to 1.49% in 2020-2021 and 2.38% in 2021-2022 based on the yield curve approach.

Return to table 20 footnote 5

The following table outlines the calculation of interest for the 2022 and 2021 fiscal years.

Table 21 Calculation of Interest
(with Experience-Adjusted MortalityTable 21 Footnote 1 and Alternative Interest RatesTable 21 Footnote 2)
($)
Fiscal Year 2021-2022 2020-2021
Vested Members
Interest on:
Experience adjusted liabilities as at 1 April of prior year
1,421,2511,036,040
Maturities
4,9273,420
CRF Recoveries
3655
Less interest on:
Annuity Payments
(102,483)(71,789)
Commuted Values
(398)(395)
Transfers to CRF
00
Total Vested Members 1,323,333 967,330
Deferred Members
Interest on:
Experience adjusted liabilities as at 1 April of prior year
35,94831,240
Premiums
450
CRF Recoveries
01
Less interest on:
Maturities
(4,927)(3,420)
Refunds
(292)(226)
Transfers to CRF
(37)(2)
Total Deferred Members 30,737 27,593
Total Interest 1,354,070 994,923

Table 21 Footnotes

Table 21 Footnote 1

Using mortality assumptions used for the CPP beneficiaries (with appropriate loading) consistent with the 30th CPP Actuarial Report for both fiscal years 2020-2021 and 2021-2022.

Return to table 21 footnote 1

Table 21 Footnote 2

Using a yield curve approach determined by reference to market yields at the end of the reporting period on Government of Canada Bonds and Treasury Bills (the equivalent flat interest rate is 1.49% for fiscal year 2020-2021 and 2.38% for fiscal year 2021-2022). The calculation of interest for the fiscal year is based on the rates at the beginning of the period while the end of period liabilities are based on the rates at the end of the period.

Return to table 21 footnote 2

Footnotes

Footnote 1

The methodology to develop this yield curve is set out on the Bank of Canada’s website.

Return to footnote 1